Two more rate hikes in 2017 reasonable, Fed's Kaplan says
The US central bank should hike interest rates twice more in 2017 and was moving towards the point where the balance sheet could be allowed to start to reduce gradually, a top official said.
In remarks to Reuters, Dallas Fed president Robert Kaplan said two more hikes this year was a "reasonable" expectation if labour market slack continued falling and inflation kept moving towards the monetary authority's goal of 2%.
He also said that now that it had moved again on rates, the Federal Reserve had the benefit of a little time to observe how the economy reacted.
"Now that we’ve done it, I think that we’ve got the benefit of a little time here to see how the economy unfolds. I plan to take advantage of that to assess how the economy is unfolding and be prepared to make a judgment as we head toward the next meetings," he said.
Kaplan had not factored in impacts from the new US administration´s policies which might raise the rate of growth nor would he do so until he was pretty sure they would be implemented.
Similarly, he was "mindful" of the fact that some policies such as on immigration, trade and healthcare might have a negative impact on consumer spending and the economy.
As of 1916 GMT Fed funds futures were pricing in a 100% probability that the target range for the Fed funds rate would be at between 1.25% and 1.50% by the end of the year and odds of 19.7% that it would be at between 1.50% and 1.75%.